Tringas, G. v Ansett Transport Industries (Operations) Pty Ltd

CATCHWORDS

Practlce and procedure - amendment of

statement of claim -

prior order dismissing cause

action of

one applicant

---

whether other applicants can later rely upon the same cause

of action - whether existence of prior order constitutes a

bar to amendment.

Trade Practices Act 1974

ss.52,82,8?

Federal Court of Australia Rules 0.23

Cellulose Products Ptv. Ltd.

v. Truda

(1970) 92 H . N . (N.S.W.)

561

Aurel Forras Pty. Ltd.

v. Graham Karp Developments Pty. Ltd.

C19753 V.R. 202

Bate v. International Computers (Aust.) Ptv. Ltd.

(1984)

2 F.C.R. 536

Port of Melbourne Authority v. Anshun Pty. Ltd.

C19803 V.R. 321; C19813 V.R. 51; (1981) 147 C.L.R. 589

GEORGE TRINGAS

and STAVROULA TRINGAS

and

ANSETT TRANSPORT INDUSTRIES (OPERATIONS) PTP.

LTD.

and ANSETT TRANSPORT INDUSTRIES

LIMITED

V. No. G 99 of 1982

Northrop J.

Melbourne

12 February 1986

(Not considered appropriate for general distributlon.)

IN THE FEDERAL COURT OF AUSTRALIA	)
1

VICTORIA	DISTRICT	REGISTRY	1	V. No. G 99 of 1982
)

DIVISION	GENERAL	1
BETWEEN :

GEORGE

TRINGAS

and

STAVROULA

TRINGAS

Applicants

and

ANSETT TRANSPORT INDUSTRIES (OPERATIONS)

PTY. LTD.

and

ANSETT

RANSFORT

INDUSTRIES

LIMITED

Respondents

COURT: NORTTHROP J.

U: 12 FEBRUARS 1986

W: MELBOURNE

MINUTE OF ORDER

THE COURT ORDERS THAT the motion be refused, with costs to	be
taxed.

(Settlement and entry of Or1	ders is deal	,t wi	, th in 0 . 3 6 of	th	,e
Rules of Court.)

I .I

IN THE FEilERAL COIJRT OF ATJSTRALIA	)	r
,.
1	. .

VICTORIA DISTRICT REGISTRY	1	V. No. G 33 of 1982
1

DIVISION

GENERAL

)

BE-N

and

ANSETT TRANSPORT INDUSTRIES (OPERATIONS) PTY.

LTD.

and

ANSETT TRANSPORT INDUSTRIES

LIMITED

Respondents

COURT:

NORTHROP J.

W:	12 FEBRUARY 1986

PLACE:

MELBOURNE

EX TEMPORE REASONS FOR

JUDGMENT

By deed of agreement dated 20 November 1381 Ansett Transport Industries (Operations) Pty. Ltd. agreed tu sell

business

Newtons

Travel Services

Pty. Ltd. At all

material tlmes the applicants, George Tringas and

Stavroula

Tringas,

were

the

directors

and

two

of the

principal

shareholders of Newtons.

The applicants were parties to the

deed of agreement dated 20 November 1981 and under that

agreement jointly and severally guaranteed to Operations the

due and

punctual

performance

Newtons

of all its

obligations

contained

that

deed.

Under

the

deed

agreement the laws of

the Australian Capital Territory were

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to apply to the rights and obligations of the parties to the

deed.

In July 1982, Newtons and the applicants commenced

these

proceedings

the

Federal

Court.

The then

three

applicants sought damages against Operatlons and its parent

company Ansett Transport Industries Limited, pursuant tn

s.82

of the

Trade

Practices

Act

1974 based

substance

breaches of 5.52 o f the Trade Practices Act and In

addition,

sought orders declaring the deed of agreement including the guarantee vold ab initicj pursuant- to 5.E7 of the Trade

Practices Act and

an order directing the repayment

the

moneys paid

by Newtons to Operations.

It should also

noted that it was claimed that Newtons had validly rescinded

that deed of agreement.

Operations commenced proceedings

in the Supreme

Court of the

Australian Capital Territory against the two

applicants, Mr. and Mrs. Tringas, on their guarantee.

The

amount claimed was for

$585,639.37 being the amount alleged

to be owing	by Newtons to Operations under the deed	of
agreement.

By order made on 29 October 1982, the Federal Court

ordered

that

Newtons

provide

security

for

the

costs

Operations and ordered further that until security

was given,

the action by Newtons be

stayed.

See 0 . 2 8 r.5 sub-rule

(1)

paragraph (a) of the Federal Court Rules.

- 3 -

On 30 June 1983, the Supreme Court

of Vlctoria

ordered that Newtons be wound

up and Mr. D.P. Tonkin was

appointed liquidator of Newtons. By

notice dated 15 December

1983, Operations gave notice that

it would move the

Court for

orders that

unless

Newtons

provided

security

for costs

pursuant to the order of 29 October

1982, the application of

Newtons be dismissed with costs.

On 17 February 1984, the

Court ordered by consent that the proceedings, insofar as

they were brought by Newtons,

be dismissed with costs.

That

order was made

by consent and on the face of the record must

have been made with the consent of

Mr. Tonkin, the liquidator

of Newtons, and the order must

have been made pursuant to

0.28 r.5 sub-rule (1) paragraph (b) of the Federal Court Rules. This is s o , even though the wording of paragraph (b) is as follows:-

"5. (1) Where the Court

orders that

the

applicant provide securlty fnr costs, it may order-

...

(b)

that if the applicant fails to comply with the order to provide security within the time limited in the order, the

proceeding be thereafter

stayed

dismissed.

Counsel for Operations and Ansett in

the present case

has

argued that this is

an inference which cannot be drawn

because on the face of it the record merely says, by consent

the

proceedings

dismissed.

But

having regard

the

motion which was before the Court

and to the existence of the

earlier order for the

giving of

security for costs and the

staying of the action, x t is apparent, in my opinion, that in

dismissing

the

proceedings,

consent, the Court was

1 P

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exercislng the power conferred by	0 . 2 8	r.5	sub-rule	(1)
paragraph (b).

I . _,

In the meantime,

Operations

had commenced

proceedings in the Supreme Court

of the Australian Capital

Territory against ths applicants based

on the guarantee given

by them. Apparently

with the consent of the parties, the

clalm by Operations

was to be brought by way of

cross-claim

in the present proceedings in lieu of

continuing with the

proceedings in the Supreme Court of the Australian Capital Territory. Pursuant to directions made in this application, the following is a summary of the pleadings as between the

two applicants and the respondents, Operations and Ansett,

immediately prior to

the present motions before the Court:-

Further Amended statement of claim in which the two applicants are George Tringas and Stavroula Tringas.

is dated 1 May 1954.

Thls statement of claim is similar to

I ,

the

original

statement

of claim and in

substance

the

applicants are seeking orders that the deed of agreement is rescinded; they are claiming damages and are seeking an order that the guarantee is not enforceable against them, and an

order declaring the guarantee void ab initio.

The last order

being apparently under

s.87 of the Trade Practices Act.

2 .

defence to that

statement

claim.

The

defence is dated 10 May 1984 and is in substance a denial of

I "

the facts upon whlch	the applicants' claims are brought	and	. ..
are based.

I -	- 5 -
I

3 .

cross-claim

dated 10 May 1984 by which

'Operations is seeking $585,639.37 under the guarantee given

by the applicants and is contained in the deed

of agreement.

In substance, the cross-claim

is the statement of claim that

had been used in the Supreme Court	of the Australian Capital
Territory proceedmgs.

Defence to the cross-claim dated 19 May

1984.

In this defence the applicants rely upon an allegation that

the guarantee

was rescinded by notlce dated

12 July

1982,

given by Newtons with respect

tu the deed of agreement.

addition, the applicants say that by

reason of the matters

raised in the statement of claim, they are not liable	to
Operations.

By notice of motion dated 25 November 1'385, the

applicants sought the

following orders:-

"1.	That the Cross-Applicants be granted leave to

dellver and file an Amended Defence to Cross-Claim and Cross-Claim in the

form of the	I
r,

exhlbit marked 'SEG 10' to the affidavit

Sean Elwin

Grant

sworn

the

25th

day

November 1985 and filed hereln.

2 .

That the self-executing order

of Mr. Justice

Northrop made the

17th day of February 1985

herein be set aside.

i	1	,	E
I .

I	- 6 -
l

3 . Alternatlvely, that the

self-executing order

r ,

l -

of Mr. Justice Northrop made the 17th day

_ I

I .

February 1985 be varied so as to enable the Cross-Applicants to raise in their Cross-Claim

against

Ansett

Transport

Industries

(Operations)

Pty.

Ltd.

the

Cross-Respondent

herein the former claim of Newtons Travel

Services

Pty. Ltd. (in liquidation)

for

damages for contraventions

of Section 52(1) of

the Trade Practices Act 1974 (Cth.).

For such further orders

as the Court considers

appropriate.

It is difficult to understand the reference to the

self-executing order referred to in each of orders 2 and 3 as sought by the applicants. The order made on the 17th day of February 1984 was an order by consent dismissing the claim by

Newtons.

It was in its terms

final and absolute and was not

and could not

be described as a self-executing order to

operate in the future.

By notice of motion

dated

2 9 November

1985,

Operations and Ansett are seeking orders that the proceedings

be set down for trial.

The two motions came on for hearing

on 6 February 1986.

In support of order 2 the applicants

- 7 -

relied upon 0 .28 r.5 sub-rules ( 2 ) and ( 3 ) .	The whole of r.5
should be read:-

"5. (1) Where

the Court

orders that

the

applicant provide security for costs, it may order-

(a) that the proceeding

on any claims by the

applicant

for

relief

be stayed until

security is provided; or

(b) that if the

applicant fails to comply

with the order to provide security within

the

time

limited

the

order,

the

proceedinq

thereafter

stayed

dismissed.

( 2 ) Subject to

sub-rule (11,

the Court may

set aside

or vary any order made under

this Order.

( 3 ) mere

proceeding

stands

dismissed

pursuant to an order under this

Order, that order

shall not be set aside or varied except in speclal

circumstances.

It should be noted further that under

0.28 r.1

reference in that Order to an

applicant extends to

any person

. -

I '

who makes a claim for relief

in any proceeding and

accordingly would apply to

a respondent who is seeking by way

of cross-claim, relief against

a respondent.

The motion to set aside the order of

February

1984 is refused. Newtons is in liquidation, the motion is

not made

on behalf of Newtons.

The liquidator presumably

does not desire

to proceed with the proceedings. There is no

basis for the motion

to obtain an order that Newtons

be made

an applicant.

To do so would make a mockery of the order for

security

for

costs.

Newtons

would

become

an applicant.

Newtons is insolvent.

The

liquidator who controls Newtons

l ,

should not be compelled to continue

with proceedings which it

- e -

does not want

to take and accordingly, there is

no basls for

the order seeking to set

aslde the ludgment.

The substance of the submissions made on behalf

the applicants

relation to the other matters can be

summarised. In the present case I do not express any final or concluded views on the questions of law raised, and any

views I so

express are

on the basis that they are in the

nature of interlocutory matters before the Court, and would not in any way prevent the Judge hearing the action from expressing views contrary to them.

The cross-claim broughk

by Operations is based on a

guarantee.

Counsel

for

the

applicants

concedes,

quite

correctly, that in answer to a claim on the guarantee, a guarantor cannot avail himself nf remedies the principal debtor may have against the creditor to whom the guarantee is

given. Counsel

does contend that there is

an exception to

that rule, namely the existence

of an equity arising from the

insolvency of the principal debtor

which allows the guarantor

to raise as a defence to an

action based on the guarantee, a

claim which

the principal debtor may have had against the

guarantee and arising out of the transaction in which the guarantee was given. Counsel relied upon a number of

authorities including Cellulose Products Pty. Ltd. v.

Truda

(1970) 92 W.N.(N.S.W.) 561, and

authorities

referred

therein and to authorities in the United States of America.

There is much to

be said for that contention.

To some

extent, the

applicants have relied upon that principle

In the

I t ,

I '

- 9 -

exlstlng statement	of claim	and In their defence to the
cross-clalm.

The existence of the

exception arises from the

insolvency of the principal debtor and is based

on the equity

that if

a guarantor is required to pay

a debt of the

principal debtor, normally he

can claim that amount so

paid

from the principal debtor. But

if the principal debtor

insolvent, his only remedy would

be to sue or to claim in the

insolvency, and in those

circumstances,

would

inequitable for the guarantor not

to be able tu rely upon any

defence or claim that the principal debtor may

have against

the creditor if the creditor was to sue the principal debtor.

. ,,

The existence of the equity attempts to

work out what is fair

and just as between the guarantor and the creditor.

However, the form of the order sought in order

3 of

the motion by the applicants is not appropriate, and reference is made to Aurel Forras Ft-q. Ltd. v. Graham Karp Developments Ptv. Ltd. C19753 V.R. 202 at p . 2 2 0 where Menhennitt J. said, and I quote:-

"It follows from

the foregoing that, if a

plaintiff, in reply to a defendant's counter-claim, seeks to rely upon a claim which arose before the issue of the writ, he should, in general, apply for

leave to amend his statement of claim, but that, if

he seeks to rely upon a claim which arose after the

issue of the writ, the only way in which he can do

so, in the absence of consent by the defendant, is

in a counter-claim by the plaintiff and it was decided in v. Andrews (1882) 8 Q.B.D. 428 that

he was

entitled to raise it

in a plaintiff's

counter-claim.

See also Bate

v. International ComDuters (Aust.) Pty.

Ltd.

(1984) 2 F.C.R. 526 per Woodward J. at p.532.

i	I
l '	c

I .

- 10 -

,.:

Accordingly, the further hearlng

of the motion was

, .

adjourned to today

to enable the legal advisers

of the

I !

applicants to consider the position	of the applicants.	,
r -

On the

resumption of the hearing of the motion

today, the applicants sought leave to amend the application,

the statement of

claim and the defence

to the cross-claim.

In substance, what

was sought by the applicants

was the

inclusion of certain claims contained in paragraphs

15 to 22

of the document handed to the Court this morning.

By paragraph 15, the applicants sought to

allege an

agreement between Newtons

and Operations containing a number

of terms being the terms

of the representations constituting

the conduct alleged which

was entered into by Operations in

breach of s.52 of the Trade Practices Act.

Paragraph 16 alleges

breaches of those

terms.

Paragraph 17 alleges

a collateral agreement between Newtons

and

Operations;

the

terms

of the

agreement

being

the

representations which constitute the conduct, the basis	of
the s . 5 2 Trade Practices Act claims.

- 11 -

Paragraph 18 alleges breaches

of those collateral

warranties. Paragraph	19	alleges damages - and I will read
that paragraph:-

"19. In the premises Newtons has suffered loss

and

damage.

PARTICULAFG

OF LOSS AND D A i i G E

Full particulars of

loss and damage will be

provided prior to trial.

Interrupting the examination of the proposed amendments, it should be noted that paragraph 19 includes the claim for damages based on s.52 of the Trade Practlces Act which was a

claim made

by Newtons in the original statement of claim when

Newtons was an applicant.

That claim has been dismissed by

consent. Faragraph 19 also claims damages based upon the terms of the agreement referred to in paragraph

15 of

the

proposed amendment and also damages for breach of the collateral warranties alleged in paragraph

17 of the proposed

amendment. Neither of those causes of action were pleaded by

Newtons in its original statement

of claim.

Coming back to

the pt-oposed amendments, paragraph

20 alleges that Newtons

was wound up on 30 June 1983.

Paragraph 21 raises fairly and squarely the equity which has been discussed earlier in these reasons. It reads as

follows

"21. In the premises the applicants

are entitled to

set-off against the

cross-claim

the

respondents so much

of the claim of Newtons

for 105.5 and damage arising by reason of the matters contained herein as will be sufficient

satisfy

extinguish

said

the

cross-claim.

I .

- 12 -

By way of comment it is noted that thls is stated

in the form of

a cross-claim but is expressed

as a set-off to

a cross-claim by Operations. It is based fairly and squarely

on the equity.

It is

lmited to the amount of the claim by

Operations against the two applicants and even though Newtons

is not a party to the proceedings, that

is not a fatal defect

having regard to the fact that Newtons

is in liquidation.

Paragraph 22 although marked to be a new

paragraph

is, on the face of it, almost identical to paragraph 15 of the statement of claim presently before the Court. It reads

as follows:-

" 2 2 . Further, by reason of the matters aforesaid:-

Newtons

became

entitled

to, and did,

rescind the agreement embodied in

the

deed

referred

paragraph

12(a)

hereof;

' I .

There is now

inserted the word

"hereof" which did not appear

in the current statement

of claim.

"(b)

the guarantee is not enforceable against

the applicants or either

of them; and

(c)

the applicants are entitled to an order

declaring the guarantee void

ab initio."

So in reality, the amendments

now sought to the

statement of

claim are in

relation to the terms

of the

agreement between Newtons and Operations; the collateral

warranties, the terms of which are the same as those terms,

damages suffered by Newtons for breach of those collateral

- 13 -

warrantles as well as for contravention of 5 . 5 2 of the

Trade

Practices Act and a set-off of	the amount up to the amount	Of	\ '
damages suffered by Newtons.

Problems do arise in relation to a claim based

5 . 5 2 of

the Trade Practices

Act by

incorporating the same

facts as being terms of

an agreement, particularly when, from

what appears from the pleadings,

the agreement was reduced to

writing and became

a deed of agreement, and these terms are

not those contained in the

deed of agreement, as well as

alleging

collateral

warranties.

But

nevertheless,

on the

face of it, if the applicant desires to amend and there

is no

other reason why the leave should not be given to so

amend,

leave would he

given

to raise those additional matters.

Likewise, from what has been

said

earlier,

leave

would

normally be given

to raise the set-off based on the equlty

discussed earlier in these reasons.

The

proposed amended defence to cross-claim

complementary to the amendments	to	the statement of claim,	L .
l

and what is sought is

the addition of a further paragraph as

follows

"20. Further and in

the

alternative

the

cross-respondents will seek to set-off so much of their claim herein, including the claim of Newtons' raised by them, as will be sufficient to satisfy or extinguish the claim of the

cross-applicants herein."

That is a defence based fairly

and squarely on the equity.

!._

- 14 -

The proposed amendments to the application are

insert new paragraphs (d), (e) and (f), and I will read:-

"(d) an order pursuant to sub-section R7(2)(d)

the Trade Practices Act 1974 (Cth.) directing the respondents and each of them to pay to the

applicants the amount of any

loss or

damage

suffered by the applicants

as a result of the

contraventions

referred

the

Further

Amended Statement of Claim;".

This claim is brought under

s.87(2)

of the Trade Practices

Act because

problems that might arise in relation to

limitations of actions arising

from

the provisions of that

Act. At the moment the question

as to whether the

limitation

period is six pears or three

is pending in the High Court.

"(e) an order setting off against any amount found to be due upon the respondents' cross-claim

much

the

loss and

damage

suffered

Newtons by reason of the matters referred to

in the Further Amended Statement of Claim

will be

sufficient to satisfy or extinguish

such cross-claim;

(f)

interest pursuant to Statute;".

Counsel for Operations

and Newtons has opposed the

granting of leave on two principal grounds. The first: that of futility. This is based on the principle that where a

claim is being made

or sought to be made,

which cannot

possibly succeed, the Court should refuse

to give leave to so

amend a statement of claim as to raise that particular claim.

In elaboration of

that submission, counsel argued

that the applicants cannot have any greater right than the

I	right Newtons had, and even though Newtons is not a party to the proceedings and need not be a party, the applicants

- 15 -

cannot raise any crass-claim by way

defence or

set-off

because

Newtons

claim

for

those

very

matters

has been

dismissed by consent.

He relles upon the principle that a

dismissal or judgment

in an action, as this is, merges the

cause of action in the judgment, and that cause

action

cannot then

be relied upon by the party to those proceedings.

And of necessity, other persons cannot raise that same issue in other proceedings.

Counsel relied upon a series of authorlties:

Port

of Melbourne Authoritv

v. Anshun

Ptv. Ltd.

in the Supreme

Court of Victoria, McGarvie J., reported E19803 V.R. 321; an appeal to tine Full Court in C19817 V.R. 81, and in the High Court, (1981) 147 C.L.R. 5 8 9 . number A of general propositions arise from those authorities. The first one, which 1s stated at p.324 of the judgment of McGarvie J. is as

follows :

"1. Where a cause of action is claimed upon

or put in suit in

a proceeding and judgment is

obtained,

the

cause

action merges

the

judgment or is negated by the judgment and has no later existence as a cause of action. Accordingly, no proceeding can later be brought upon the cause

of action.

Accordingly, no proceeding can later be brought upon the

, .

cause of action.

In Anshun's Case, there had been a Judgment of

the

i '

Court

after

trial.

the

present

case, there

interlocutory judgment; there has been no judgment on the merits as opposed to an interlocutory judgment even though

final. In my

opinion,

that

makes

no difference to the

, .-

- 15 -

general principle, although problems do arise in the present

case because of equities which I will explain m a moment.

It is submitted by counsel for Operations that the

judgment obtained by Operations against Newtons is

a bar to

any subsequent action brought by Newtons and, of

necessity,

is a

bar to any claim brought

the applicants, the

Tringas', based upon a cause of action which has been barred by Newtons agreeing to judgment being entered against it. He

contends that to enable the Trinqas'

to bring such a cause of

action would, in substance, place the respondents in a position of being able to bring an action on Newtons behalf when Newtons cannot bring that action where the Court has

made an order for security for costs against Newtons,

and, on

a motion to have the claim

by Newtons dismissed, Newtons has

consented to the clalm being dismissed; in other

words,

judgment against it; that

it would be unfair to allow Tringas

to bring that claim based

on 5 . 5 2 of the Trade Practices Act,

and equally unfair to allow the applicants to bring a related claim arising from the same facts based upon terms of an agreement, and collateral warrantles.

As opposed to that, it must be remembered that

Operations is claiming under

a guarantee. The guarantors, if

they are liable under guarantee,

are paying a debt of the

principal

debtor, the debtor is in

liquidation,

the

guarantors have no

way to ensure that the principal debtor

takes all steps to raise

by way of defence or counter claim,

claims It might have against the creditor.

That here, the

- 1 7 -

liquidator can do what he likes and this could well amount to

an unfair basis in which the applicants are unable to raise

defences which equity they are entltled to raise. It must be

remembered however, that the need for the guarantee

was

secure payment where, for any

reasan, the principal

debtor

did not or could not pay the debt.

In fact,

the

material

support

of their

motion, the applicants alleged

facts which suggested that

Opet-ations was in sons way actlve in obtalning the winding

order against Newtons as

a step in defeating

Newtons' claim

against Operations. During the course of submissions, on that issue, I expressed a view that there was no basis whatsoever for any such suggestion. The whole purpose of the

security for coscs being awarded

against a corporate body

was

because of the unique provision relating

to corporations;

special provlsions being made that

if a corporation is unable

to pay its debts or pay the costs or give security, it should

not be allowed to pursue proceedings

in the Court.

Nevertheless, one is faced with the problem of the applicants, under normal circumstances, having

;. .

a claim based	. .
I .-

in equity to

raise by way of

defence, a claim that Newtons

may have against Operations being bound by actians over which they have no control. Nevertheless, applying the principles of law which are discussed in Anshun's Case, in my opinion,

the existence of the judgment or order against Newtons does

constitute a bar to the applicants in relying upon any claim

that Newtons may

have against Operations.

1 -

- 18 -

Likewise, in my opinion, to allow the applicants to

bring a related

claim

based

on breach of terms of an

agreement

between

Newtons

and

Operations

or collateral

warranties between Newtons and Operations, would

be a way to

avoid those principles of

law which is not permissable, and

accordingly, in my opinion, the existence

of the judgment is

a bar to the proposed claim of proposed amendment sought by

the applicants.

This does not of necessity mean that

the

applicants cannot rely upon the matters already raised

them in relation to the recission of the deed of	agreement,
including the terms relating to the guarantee.

T h e other main matter raised by way of

opposition

to the order sought was on discretionary grounds, namely that

because of the delay in the matter. the matter having been

ready for trial, because of the problems associated with the

fact that Newtons having been ordered to give security for

costs did not give them, and then subsequently had their

claim dismissed, as a matter of discretion the Court should

not allow the applicants to raise those same issues, as it

were, on behalf of Newtons, since to do so would be to defeat

the orders already made.

Again,

this

raises

a nice

balancing

exercise

between the equities of

the applicants and the existence in

law of the judgment, and

as a matter of discretion, if

otherwise there is power to do so,

I would refuse to

grant

- 19 -

r.;

leave sought to amend the statement	of claim, the defence to
cross-claim and the application.

In all

the circumstances, therefore, the

motion

brought by the applicants and dated 25 November 1985, is

refused, with costs to be taxed.

[1986] FCA 140

2 Dec 1986